Investors love the idea of stock splits in the S&P 500, including Tesla (TSLA). And there are plenty of other stocks that could still do it.
Eleven stocks in the S&P 500, excluding Tesla, trade for more than 600 a share — making a 2-for-1 split more than doable, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Those high-priced stocks include homebuilder NVR (NVR), auto parts seller AutoZone (AZO) and burrito chain Chipotle Mexican (CMG).
Splits are a hot topic on Wall Street as Tesla (TSLA) shareholders vote on plans for a 3-for-1 stock split on Aug. 4. Tesla would follow five other S&P 500 stocks to split their shares this year.
“A split does not change the company’s fundamentals in any way and only would make a very high share price more palatable for those unwilling to spend a large chunk of change for a single share,” said Bespoke Investment Group. “As such, one could argue that a split also shouldn’t impact how a stock trades too dramatically.”
Where Have All The S&P 500 Splits Gone?
Stock splits are way down in number. And that’s opening an opportunity for more to come.
The median S&P 500 stock price is now 105 a share. That’s up more than 45% in just five years, even amid a downturn this year. And that is in part because the number of stock splits is collapsing. Last year, less than 10 S&P 500 companies split their shares, says Bespoke. That’s down from the more than 60 S&P 500 firms to pull off splits in 2005.
But don’t worry about the dearth of splits. Investors don’t seem to mind much anyway.
Shares of the five S&P 500 stocks to split their shares this year are down 16% on average. The only S&P 500 stock to split this year that’s up is WR Berkley (WRB), which has gained nearly 12%. On the other hand, shares of dexcom (DXCM), which split 4-for-1 back in June, are down more than 34% on the year.
$600 A Share! Where The Next Splits Might Come From?
Berkshire Hathaway, at 443,720 a share, is the highest-priced stock in the S&P 500. But it’s not a split candidate, as the company has a lower-priced class B share trading for roughly 300 for the price-sensitive investors.
But the next-highest-priced stock is one that many investors think a split is long overdue. That’s homebuilder NVR, which trades for 4,415 a share. The stock, though, is mostly held by institutions. Vanguard owns 11% of the company and Capital Group nearly 9%. These types of large investors aren’t nearly as interested in splits as individual investors.
Vanguard is also the largest holder of high-priced AutoZone shares. The mutual fund giant owns 10% of the stock, which trades for nearly 2,200 a share. And it’s the No. 2 holder of another S&P 500 with a nosebleed stock price: Chipotle. Shares of Chipotle trade for nearly 1,600 a share.
With S&P 500 stock prices this high in a down market, it’s only a matter of time until splits start appearing again.
Time For S&P 500 Splitsville?
S&P 500 companies with the highest per-share stock prices above 600 a share
|company||Symbol||Stock price on Aug. 4||sector|
|Booking Holdings||(BKNG)||1,947.25||Consumer Discretionary|
|Chipotle Mexican Grill||(CMG)||1,584.33||Consumer Discretionary|
|O’Reilly Automotive||(ORLY)||706.92||Consumer Discretionary|
|Regeneron Pharmaceuticals||(REGN)||614.96||Health Care|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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